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Hedge Fund PointState Stops Clients From Cashing Out in Full

Suzy Waite

(Bloomberg) -- PointState Capital, the macro hedge fund started by former traders for billionaire Stan Druckenmiller, is blocking investors who ask to pull their money out from getting their cash back in full.

Clients who withdrew their investments at the end of last year will get 88% back in cash, according to a letter to investors seen by Bloomberg. The remaining 12% will be distributed as shares in new portfolios created to hold assets with “somewhat limited liquidity” that the firm’s management deemed would take longer to sell than they previously thought. Redemptions on March 31 or later may be subject to similar terms, the letter states.

Redemptions for the fourth quarter were $196 million, according to a person familiar with the firm, who added that the assets moved to the new portfolios included a residual private equity investment, a pre-IPO convertible note and a cash collateralized loan.

“We’ve concluded that this is the most appropriate way to fairly and equitably balance the interests of all of our investors,” the letter states. PointState has a “high degree of confidence” in the assets being transferred.

The cash freeze is a fresh blow for PointState. Its main fund has failed to recover from its 2018 losses, when it dropped 19%. The fund finished 2019 on a high, up 3% in December, though performance for the year was flat to slightly down, depending on share class, according to a person with knowledge of the matter. The firm has rarely opened to new money since it began trading in 2011, but was meeting investors in November to raise fresh cash. Its assets under management have nearly halved from a peak of $10 billion.

PointState has suffered a number of senior departures, including co-founder Josh Samuelson and portfolio manager Greg Ley.

A spokesman for New York-based PointState declined to comment.

During the depths of the financial crisis, many hedge funds put hard-to-shift assets into so-called side pockets to buy time to raise cash as clients stampeded toward the exit.

These “special purpose vehicles” are designed to give fund managers time to get the best price for assets, rather than dump them in a fire sale to satisfy redemption requests. More than a decade later, billions of dollars of the assets remain to be sold.

(Updates with redemptions in second and third paragraphs.)

--With assistance from Nishant Kumar.

To contact the reporter on this story: Suzy Waite in London at swaite8@bloomberg.net

To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Patrick Henry, Alan Mirabella

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